Google's Mobile Movement

Enhanced Campaigns and the Rising Cost of Mobile

Mobile devices are embedded into everyday life. In fact, 83% of consumers do not leave their home without their smartphone1. Undoubtedly, we live in a constantly connected world, where our devices, location, and the time of day signal the places we want to go, the activities we want to engage in, and even the products we want to purchase. Recognizing this shift in user behavior, and in an effort to simplify the way marketers manage their paid search campaigns, Google introduced enhanced campaigns as a redefined approach to targeting and engaging users by device, location, and time of day.

Since early 2013, advertisers have been racing to not only understand how enhanced campaigns will reshape their paid search strategies but also how they will impact their ability to acquire revenue. For advertisers that were leveraging separate desktop-, tablet-, and smartphone-targeted campaigns, enhanced campaigns represented a significant shift in control and transparency. With combined desktop and tablet targeting, along with campaign- and group-level mobile bid adjustments, advertisers lamented over potential cost-per-click (CPC) inflation and poor ad performance. But in reality, most did not know what to expect.

Billions of dollars per month now funnel through enhanced campaigns and the impact of Google’s changes has become measurable. The following will provide advertisers with a benchmark analysis on enhanced campaign performance trends across devices and provide predictions on future performance.

Methodology

To develop our analysis, we sampled the Marin Global Online Advertising Index. Over a nine week period year-over-year and beginning one week following the migration deadline for enhanced campaigns, we conducted a longitudinal analysis, by device, of key performance indicators across US advertisers and agencies that manage over $4 billion in annualized paid search spend through the Marin platform. Our data and findings skew towards the behavior of larger advertisers, and may not reflect performance trends for small- or medium-sized businesses. However, the size and diversity of our dataset, coupled with our broad geographic coverage, enables us to provide the most comprehensive report on the impact of enhanced campaigns. Our analysis refers to trends in the search network across desktop, tablet, and smartphone devices. We normalized values and used medians to mitigate the effects of outliers and to make the findings more representative of the performance of the typical enterprise advertiser.

A Convergence of Devices

Despite the proliferation of mobile devices, search behavior across tablets and desktops have shown surprising similarities year over year. In 2012 during the nine week period, click-through rates (CTR) on tablets were 51% higher than on desktops. However this gap closed significantly in 2013 as tablet CTRs were only 27% higher than on desktops, even as smartphone CTRs rose from 82% to 88% higher than their desktop counterpart. This trend, on the heels of Google’s move to combine desktop and tablet targeting, supports the search giant’s position that the line between the two devices has begun to blur. Though conversion rates and levels of brand engagement will ultimately determine whether the behavior on these devices is in fact converging, our data indicates that Google’s assumptions are more a reality than fantasy.

Shifting From Desktop to Mobile

Even as performance on desktops and tablets converge, smartphones continue to lead the pack in terms of adoption and user engagement. With users performing more searches on-the-go and engaging with businesses in-store and while watching television and performing other daily activities, paid search spending has shifted toward smartphones. This trend has been led by an increase in the share of impressions directed toward these devices.

In 2012 during the nine week period, the share of search spend on smartphones was 7.7%, but increased to 12.6% in 2013. To a lesser extent, tablets also saw a rise in its share of spend. The increase in share of impressions and spend for tablets was due in part to both user adoption and the combining of desktop and tablet targeting. As a result of this combined targeting, we expect that year over year increases in the share of impressions and spend on tablets will soon outpace the increases on smartphones.

Taking a step back, what makes this trend significant is not that paid search spend is increasing on smartphones and tablets, which has occurred consistently over the last three years, but that advertisers must now, more than ever before, focus their attention to optimizing the mobile experience. In fact, mobile-optimized ad creative and mobile websites with content geared towards on-the-go users are now a standard for any enterprise advertiser.

The Rising Cost of Mobile

More and more businesses are realizing the substantial revenue opportunity in mobile advertising, and as a result, the auction landscape has become increasingly competitive. Even with the introduction of an unfamiliar mobile bid adjustment, smartphone CPCs continued to rise. In 2012 during the nine week period, smartphone CPCs where 39% lower than desktop CPCs, compared to 2013 when smartphone CPCs increased to only 26% lower than desktop CPCs. The rise in smartphone versus desktop CPCs is not all that surprising given user adoption and the shift in search spend.

On the other hand, tablet CPCs were slightly lower than desktop CPCs in 2013 compared to 2012 during the nine week period. This trend moves counter to what many industry experts predicted. Though the cause of this decrease may be a result of a shift in seasonality, we do not expect this trend to continue. With advertisers now forced to bid the same on desktops and tablets, CPCs across these two devices will undoubtedly converge.

Google's Mobile Movement

The growth in mobile adoption and incorporation of mobile search into everyday life continues to drive innovation in paid search, most noticeably with the development of Google enhanced campaigns. Though the overall impact of enhanced campaigns remains a compelling one, certain verticals will experience performance that varies from the industry average. Regardless, all search marketers must remain agile and efficient and focus their efforts on optimizing for the mobile user. Capitalizing on new revenue opportunities in a redefined and relatively untested paid search landscape will require a comprehensive, well-executed approach to enhanced campaigns. Continued investing in technology and new best practices will ultimately drive success and win the battle for revenue in a multi-device, enhanced campaign world.